Eurozone Inflation Steady at 2% Amid Mixed Industrial Signals

Eurozone inflation held steady at 2.0% year-over-year in July 2025, precisely meeting the European Central Bank's target for the first time in years, signaling price stability across the region. Core inflation, excluding volatile food and energy prices, remained elevated at 2.3%, with significant price increases in food, alcohol, tobacco, and services, while energy prices continued to decline. Despite this inflation stability, the manufacturing sector showed signs of contraction in major economies like Germany and France, with the Eurozone manufacturing PMI dipping below 50, indicating economic stagnation and cautious business sentiment. The European Central Bank is expected to maintain its current interest rates, with the odds of additional rate cuts declining due to a surprisingly resilient economic performance in the second quarter and ongoing trade uncertainties linked to tariffs imposed by the U.S. under President Donald Trump's administration. Additionally, new EU-U.S. trade agreements have eased some tariff concerns, although ambiguities remain regarding the application of tariffs on sectors such as pharmaceuticals and semiconductors. Overall, Europe's economic outlook is characterized by a stable inflation environment shadowed by uneven industrial performance and cautious optimism amid external trade challenges.